What You Need to Know About Business Credit

business creditFinancing is a major priority for business owners. I’ve recently taken on a business credit card and I’m happy that I did, because between purchasing and tracking incoming funds, it can be tricky to stay on top of the books. One way to simplify spending for your company is to open a business credit account. Here are some tips on why and how to get business credit.

1. The Advantages of Business Credit

The credit industry is a $300 billion dollar affair. But with the right card, your company

can truly benefit. First of all, most business cards are able to command higher credit limits. This is because banks and credit card companies are aware that small businesses charge many more purchases than average consumers typically do.

Another efficient perk is that cards can be issued to different employers and employees. Multiple cards can all draw from the same account but be used by different people. This helps speed up business. But it allows the business owner to determine how much credit each individual employee will have access to.

Business card issuers also offer customizable payment plans for organizations because the nature of cash flow might be constantly changing depending on your industry. “Business-friendly payment terms” include discounts for balancing early or deferring payments when the funds are not available yet.

And the rewards which your company can earn while spending will help with everything from travel expenses to office supplies. Some business cards even have links to other companies and can provide card holders with discounts on related products and services.

Finally, using business cards helps to simplify accounting. They clearly define business expenses and personal purchases which just makes things easier when reporting to the IRS at tax time. And monthly credit statements can help to track spending both now and projected into the future.

2. Open an Account

Before you can open an account, your business needs to build its own credit history. Step one when it comes to building separate business credit is to open a company checking account. Use the account to write checks for bills, and use checks or a debit card to pay for business purchases. Don’t pay for any personal expenses with money from the account. Instead, transfer the amount or write yourself a paycheck in order to use the profit.

By responsibly using this account and keeping plenty of funds in it without bouncing any checks, you can begin to create a positive reputation for your company.

3. Credit Comes Next

The next step in proving your company’s reliability is to build some credit history. A credit profile is a score assigned to your account based on a combination of the following factors:

  • Bills paid on time each month
  • Bills paid in full before due date
  • Not maxing out the card
  • Number of past credit applications
  • Length of credit history
  • Capacity used

4. Choosing the Right Card

After you have spent some time establishing positive credit history, your company will be in a better position to pick and choose between different card options. A business credit card can offer rewards points, cash back or sky miles which will all come in handy for saving on operation costs. Many cards are labeled as “preferred” or “gold,” but choose the right plan for your individual business.


Reading the fine print is vital. Make sure that you weigh the options according to their fees, points available, other rewards, annual costs and interest rates. A good example of paying attention to the details comes from companies that conduct international business. If you are doing business in other countries then you will not want a card that charges extra for international transactions.

Also investigate how the card may or may not be linked to your personal account. In an emergency situation where the business loses funding, will you liable to use personal funds to repay debts?


With these perks it is easy to see why business credit can benefit your company. And with a few simple steps, your business can prepare a credit history and apply for the right card.


Source: allBusiness